National Credit Guarantee Agency to be set up
The new legal entity, which should come into effect next year, will overhaul the country’s credit guarantee system
The Cabinet approved the setting up of the National Credit Guarantee Agency (NaCGA) at its meeting on Tuesday and instructed the Finance Ministry and the Bank of Thailand to commence drafting the necessary legislation.
The NaCGA, which will be a legal entity under state control but not classified as a government agency or state enterprise, will overhaul Thailand’s credit guarantee system, assessing the credit risk of borrowers, from data verification to individual risk assessment, fee calculation, risk-based pricing guarantees, approval, and issuance of guarantee certificates. NaCGA’s revenue will come from government contributions, contributions from credit businesses, and fees from loan applicants.
NaCGA functions like an insurance institution but provides financial risk insurance for the public, through the following process:
Loan seekers contact NaCGA.
NaCGA assesses the individual risk of loan applicants.
NaCGA charges a low fee for loan guarantees based on risk (with contributions from the government and financial institutions).
NaCGA issues a guarantee certificate, providing risk insurance in case of loan default.
Loan seekers use the guarantee certificate to apply for loans from financial institutions.
Financial institutions can extend loans because the loan seekers have received risk guarantees from NaCGA.
The legislation is expected to be finalised in six months.
